Study: Majority of uninsured young Americans better off not enrolling

Wednesday, January 22, 2014 2:38 PM

The majority of uninsured young adults would be better off financially to forego buying health insurance and instead cover their own health care costs out of pocket, according to a new analysis released today by a right-leaning public policy institute.

According to a cost-benefit study conducted by the American Action Forum, six out of seven, or 86 percent, of currently uninsured young adult households would be better off financially to not purchase health insurance and instead pay the individual mandate penalty under the federal health care law.

Furthermore, despite scheduled increases in the individual penalty after 2014, it will remain financially advantageous for the majority of young adult households to remain without coverage through 2019. If the benefits of having health insurance coverage are taken into account, 41 percent of young adults would still have a financial incentive to forego health insurance five years from now, the study found.

The success of the federal health care overhaul will hinge upon the decisions of Americans ages 18 to 35 to enroll. That age group currently makes up 40 percent of the estimated uninsured population in the United States.

Beginning this year, the individual penalty for not having health coverage is the greater of $95 per uninsured adult or 1 percent of all income earned above the income tax filing threshold. Those penalties increase to the greater of $695 per adult or 2.5 times the household income by 2019. By law, a household's tax penalty cannot exceed the national average cost of a Bronze plan for the household.

"Through its insurance market reforms and overly prescriptive benefit design, the (Affordable Care Act) makes the decision to purchase health insurance more costly than it previously was for the vast majority of young adults, while at the same time significantly reducing the risks associated with the decision to go without coverage," the report concluded. "Whether young adults make the decision to purchase health insurance will depend on many factors, but the perverse economics of the ACA discourages young adults from joining the health insurance system."